AKD Securities Limited - AKD Daily (April 26, 2023)

Brokerage

AKD Securities Limited – AKD Daily (April 26, 2023)

April 26, 2023

Karachi, April 26, 2023 (PPI-OT): HBL, BAFL, ABL, FATIMA and FFBL Result Previews

HBL - 1QCY23 earnings expected to clock in at PkR8.7/sh: Habib Bank Limited (HBL) 1QCY23 board meeting is scheduled to be held on April 27, wherein we expect the largest bank in the country to post earnings of PkR12.9bn (EPS: PkR8.7) for the quarter, higher by 20%QoQ and 50%YoY. The earnings growth is expected to be driven by expansion in the bank’s NIMs to 5.5% from 5.1% in the earlier quarter, culminating into a net interest income growth of 12%QoQ and 54%YoY. We have estimated for the bank’s deposits to grow by 6.0%QoQ/15.1%YoY. Some respite to earnings is likely to stem from lower provisioning during 1QCY23, estimated to drop by 15%QoQ to PkR4.2bn. Cost to income ratio is expected to remain sequentially flat at ~57%. Alongside the earnings, we anticipate the bank to announce a cash dividend of PkR1.5/sh for the quarter as it continues to struggle with its capital position.

BAFL - 1QCY23 earnings expected at PkR4.1/sh: Bank Alfalah Limited (BAFL) will be releasing its 1QCY23 financial performance on April 27, where NPAT is expected to clock in at PkR6.5bn or PkR4.1/sh - higher by 58%QoQ and 30%YoY. As is the case with other conventional banks in our coverage, we anticipate the bank to post a sequential expansion in NIMs, from 4.8% in 4QCY22 to 5.1% in 1QCY23. Lower provisioning cost during the quarter is expected to lend a helping hand to BAFL’s bottomline, expected to clock in at PkR2.9bn, lower by 33%QoQ. Earnings growth would be further aided by a contraction in the cost-to-income ratio, expected to fall to 52.2% in 1QCY23 vs. 53.5% in 4QCY22, on the back of higher costs as a result of new rental agreements against branches entered into in the earlier quarter. BAFL’s deposits are expected to grow by 7.3%QoQ/35.5%YoY.

ABL - 1QCY23 earnings expected at PkR6.9/sh: Allied Bank Limited (ABL) is slated to announce its 1QCY23 earnings later today. We expect the bank to post earnings of PkR7.9bn (EPS: PkR6.9) for the quarter, lower by 7%QoQ and higher by 64%YoY. The heightened interest rate environment is likely to lead to NIMs expansion from 4.5% in 4QCY22 to 4.9% in 1QCY23, which would lead to the bank’s NII increasing by 18%QoQ to PkR25.0bn. We expect the bank’s non-interest income to remain flat on a sequential basis, clocking in at PkR4.3bn. The dampener to earnings growth is likely to come in the form of higher provisions, expected to be recorded at PkR1.5bn, higher by 2.4xQoQ. Moreover, the heightened taxation during the first quarter of the year is expected to further deteriorate earnings. The bank had recorded an effective tax rate of 37% in the earlier quarter. On the PBT level, the bank’s profitability is expected to improve by 14%QoQ or 94%YoY. We also anticipate the bank to announce a cash dividend of PkR2.5/sh, representing a payout ratio of 36%.

FATIMA - 1QCY23 earnings expected at PkR1.4/sh: We expect Fatima Fertilizer Company Limited (FATIMA) to post a NPAT of PkR3.0bn (EPS: PkR1.4) in 1QCY23. This culminates into a decline of 28%QoQ, while declining by 47%YoY. Revenue is down by 34%QoQ due to lower offtakes. Margins for the company are expected to clock in at 25.6% for the first quarter of the year, an improvement of 5.4ppts from the previous quarter. FATIMA is likely to post an Operating Profit of PkR5.7bn, a decline of 12%QoQ and 42%YoY. Other Income is expected to increase to PkR1.2bn, while Finance costs are expected to increase to PkR1.4bn for the first quarter of the year. Taxation is likely to return to normalcy for the quarter, likely clocking in at PkR1.5bn for the quarter.

FFBL - 1QCY23 losses expected at PkR2.6/sh: We expect Fauji Fertilizer Bin Qasim Limited (FFBL) to post a LAT of PkR3.4bn (LPS: PkR2.6) in 1QCY23, compared to earnings of PkR0.5/sh in the previous quarter and PkR1.3/sh in the SPLY. Margins for the company are expected to clock in at 8.4% for the first quarter of the year, compared to 12.1% in 4QCY22 and 21.7% in 1QCY22, with the deterioration likely on the back of higher inventory prices of Phosphoric rock. Financial charges are likely to increase to PkR3.0bn, while heightened ST Investments and will lead to an Other Income of PkR1.8bn for the quarter. Furthermore, hefty exchange losses amounting to ~PkR3.2bn will massively dent earnings as foreign trade payables are revalued.